Professional Documents
Culture Documents
► Scope of review 4
► Detailed observations
Background
► Ernst & Young Pvt. Ltd (EY) has been appointed as Internal Auditors to undertake a review of select
processes at Bloom Energy India Private Ltd. as per the scope & terms outlined in the engagement
letter. This report presents the findings and recommendations based on our phase 2 review undertaken
at Bloom Energy India Private Ltd. for the period April to October 2009
Objective of review
been taken
Policy & Delegation of authority
Absence of a
Procedures Design The delivery & transit
system to track &
for Logistics gaps in time of shipments are
Documentation monitor shipment &
& distribution process not tracked
standards transit time
No formal contract
Performance evaluation Formal contracts
available with the
not available inbound logistic vendor
Observation Risk
► Our review of the logistics & distribution process noted ► People dependent processes
that currently there is no documented policy and ► Adhoc / inconsistent procedures followed
procedures with regard to: ► Inadequate internal controls
► Logistic service provider selection Recommendation
► Parameters for selecting and evaluating logistic ► Develop a policy and procedure document for logistics &
service providers distribution function detailing process objectives, roles &
► Standard terms and conditions of a contract responsibilities, inputs to the process, key activities,
► Criteria for evaluating the performance of a logistic management information systems, formats and SLAs for
service vendor monitoring performance of service providers
► Tracking & monitoring of service levels ► Conduct a training session to roll out the standard operating
Root cause procedures for logistics & distribution team
► Need for establishing a standard process for procurement ► Identify a process champion within logistics & distribution team
not initiated with responsibility to implement the standard operating
procedures
Payments to logistics
service providers without a
valid contract &
documented rates
Observation Risk
► Our review of the process for selecting logistics service ► Possibility of availing services at higher rates
provider noted the following: ► Possibility of bias in selection of service providers
► Documents such as the request for quotation (RFQ), ► In the absence of a binding document/contract with the logistic
comparative quote analysis and approval authority for service provider, the company is not adequately protected
selection of logistics vendors were not available with rights/obligations and payment covenants
► No formal contracts/ agreements were entered into Recommendation
with the logistics service providers currently being ► Process for selecting logistics vendors to be defined and
used adhered to with immediate effect. All potential logistics service
► Contractual terms & conditions have not been defined providers must be identified and an RFQ must be sent
and agreed ► Quotes received must be reviewed and a comparative
Root cause analysis must be prepared on parameters such as references,
► Absence of a defined process for selection of logistics credentials, price quote, terms & conditions etc. Selection of
vendors & entering into contracts prior to utilizing services logistics service providers must be documented and signed as
of vendors per authorization matrix
► Formal contract must be entered into with selected logistic
service provider detailing contract terms & conditions
Significant variations
in shipment time for
shipments through
similar routes
Clearance of
goods
Link GRN with the
Selection of freight
Material receipt GRN
provider
Logistic team
Observation
► Our review of the process of freight payments noted the ► As on October 31, 2009 total duty paid as per account
following: no. 52118 ‘Commissioner of Customs’ (Bangalore
EHTP) in Oracle system was INR 1,211,506. However,
► Absence of a process to verify whether freight has
in some instances, applicable duty was paid by the
been received for the freight invoices received from
freight forwarder & then billed on to the company. While
logistic service providers
processing payments to the freight forwarder, no
► Absence of a process to verify whether freight
bifurcation of freight charges is made between customs
charges are paid only for goods ordered from the
duty paid in Oracle system leading to inability in
supplier
tracking total duty paid and list of materials for which
duty is to be paid
Payments amounting to
INR 1,502,556 made
without a valid contract
& agreed upon rates
Recommendation
► Procedures and documents, such as the request for ► For services availed beyond the scope, as defined in
quotation (RFQ), comparative quote analysis and the contract, a specific approval mechanism to be
vendor approval authority, or selecting consultants defined and incorporated prior to availing such
must be defined and adhered with immediate effect services. The approval obtained to be attached along
► A formal contract should be entered into with the with the service provider’s invoice. The Finance team
consultants. The contract should cover the scope of should check for such approvals prior to processing
service, payment terms and conditions, etc payments